With crude oil rates rising recently in the international market, a senior official of an oil marketing company (OMC) said on Monday that “increase in retail prices going forward will be inevitable” if high prices are sustained in the global market.
Pump price of petrol in Delhi was Rs 101.19 per litre on Monday and diesel was sold at Rs 88.62/litre. International crude oil prices have increased by around $3 per barrel over the last 10 days, but retail fuel prices have been kept unchanged since September 5. “Retail prices of petrol and diesel in India are also likely to be affected with the surge in international oil prices,” the person stated.
Retail petrol price touched all-time high levels across the country on July 17 (Rs 101.84/ litre in Delhi) and had remained unchanged till August 21. Global crude has corrected from the highs of $77/barrel in early-July to around $66/barrel in mid-August. After hurricane Ida slammed into the US Gulf Coast during the last week of August, crude oil rates have surged back to around $75 a barrel.
At present, the prices charged to dealers by Indian Oil Corporation Ltd are Rs 40.8/litre for petrol and Rs 40.9/litre for diesel. The Centre’s tax (basic excise, surcharge, agri-infra cess and road/infra cess) is currently Rs 31.8 per litre for diesel and Rs 32.9 per litre for petrol, while Delhi state VAT is Rs 23.4 per litre on petrol and Rs 12.9 per litre on diesel. In March and May 2020, surcharge and cess on auto fuels were cumulatively increased by Rs 13 per litre on petrol and Rs 16 per litre on diesel, leading to record-high auto fuel rates.
Analysts at HSBC have recently lowered the estimated earnings of OMCs for FY22 and FY23 from what they had projected earlier, citing lower than anticipated growth in auto fuel consumption.
Though gross refining margins for Indian OMCs are much lower than historical average levels, because retail fuel rates were constantly raised by them with rising global crude oil prices, OMCs have been earning attractive marketing margins on diesel and mediocre ones on petrol.